Korea Southern Power Co. (KOSPO), a subsidiary of Korea Electric Power Corp. (KEPCO), will participate in a U.S. liquefied natural gas (LNG) project worth 1.19 trillion won (US$1.07 billion).
KOSPO formed a creditor group with Daelim Energy Co. and U.S.-based power energy firm Indeck Energy Services Inc. in February to push ahead with the Niles project in Cass County in the U.S. state of Michigan, according to power industry sources on March 24.
The project is a 1,085 MW gas-fired combined-cycle plant which is equivalent to one nuclear power reactor. It is also a mega LNG power plant construction and operation project worth 1.19 trillion won (US$1.07 billion) that cannot be easily found around the world. The promoters of the project will raise 52 percent of the funds through financing by issuing bonds and senior debts, and the remaining 48 percent through equity capital investment. For equity capital, KOSPO will take up 50 percent, Daelim Energy 30 percent and Indeck 20 percent. In other words, KOSPO will inject 285 billion won (US$251.32 million) out of its pockets.
The expected earnings rate will be confirmed after completing negotiations on interest rates with financial companies at the end of this month. Until now, market analysts consider it as a highly lucrative project with an annual earnings rate of 8 percent to 10 percent. The Ministry of Economy and Finance approved a preliminary feasibility study on this project and the Blue House is also said to have been briefed on the project.
KOSPO is planning to make this project official as soon as it has a signing ceremony with financial firms early April and start building the facility in July. When construction is completed and commercial operation begins in February 2022 as scheduled, KOSPO will operate the facility for 35 years.
The local power company was able to win the large-scale LNG power project in the United States because the price of gas, which is the fuel of LNG power, plunged due to the shale gas revolution.